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The EUR/USD consolidated as yields eased, following last week’s stronger than expected inflation expectations. The Bundesbank warned of tight labor markets and an overpriced housing market which should help buoy European yield and eventually spill over into the EUR/USD currency pair.
Technicals
The EUR/USD is forming a bull flag pattern that is a pause that refreshes higher. Support is seen near the 10-day moving average seen near 1.2360. Resistance is seen near the February highs at 1.2555. Momentum is neutral as the MACD (moving average convergence divergence) histogram prints near the zero-index level with a flat trajectory which reflect consolidation.
Bundesbank warns of tight labor market, overpriced property
Bundesbank warns of tight labor market, overpriced property. The Bundesbank warned in its latest monthly report that “signs are mounting that the German economy is increasingly confronted with bottlenecks with regard to highly skilled staff, which could become an obstacle for an even stronger expansion”. For now though Germany has maintained its high pace of growth at the start of 2018 with the help of “an excellent order situation in industry” and “persistently good mood throughout the economy”. High levels of capital utilization should underpin investment according to the Bundesbank and the outlook for private consumption remains favorable, reflecting “favorable prospects for employment and noticeable increasing pay”. The Bundesbank suggests quarterly growth could be around 0.7% in Q1, but warned of overpriced apartments in large cities, as property prices remain boosted by cheap loans.
Eurozone construction output slowed
Eurozone construction output slowed to 0.5% year over year in December, from 2.9% year over year in the previous month. The December number meant production output was unchanged in the fourth quarter compared to the previous quarter, after contracting -0.1% in Q3.
Eurozone current account surplus narrowed in December
Eurozone current account surplus narrowed in December to EUR 29.9 billion on a seasonally adjusted basis, from EUR 35.0 billion in November. The goods surplus was pretty much unchanged, but the services income and particular the primary income surpluses narrowed. The full year surplus amounted to EUR 391.6 billion in 2017 up from 368.9 billion in 2016. Direct and portfolio investment inflows meanwhile amounted to just EUR 385.4 billion last year, a sharp declined compared to the surplus of EUR 639.4 billion in 2016. Much of this was due to a marked contraction in direct investment inflows to just EUR 0.5 billion, from EUR 222.8 billion in 2016.